Editor’s Note:This post originally appeared as a news story in The New York Post.

Are you a “friend of Frank’s?”

Not sure? Well, there are a couple of ways to tell if you’re on tete-á-tete terms with Credit Suisse First Boston’s lead technology banker Frank Quattrone, the man who has, almost single-handedly, put CSFB in the high-tech banking business.

Were you invited to Frank and Denise Quattrone’s 20th wedding anniversary party, a black tie fete at the Palace of the Legion of Honor in San Francisco? Perhaps you’ve been to CSFB’s luxe ski weekends in Aspen, Colo.? Did you get a seat for the U.S. Open at Quattrone’s magnificent home overlooking the storied and picturesque Pebble Beach golf course? Maybe you’re a partner at the venture capital firms – there were more than one – that got IPO shares of VA Linux, one of CSFB’s hottest offerings?
All those are favors that Quattrone’s friends and business associates have enjoyed in recent years.

If you’re good to Frank, Frank is good to you.

“He remembers his buddies. He remembers people who need to be remembered,” said one venture capitalist who received an allotment of VA Linux shares, in reward – he assumes – for steering some business to CSFB.

“It’s never explicit,” he said. “It’s like soft money.”

But wait – there’s more. Like the special trading accounts that CSFB’s private banking office in San Francisco open for “Friends of Frank.”
The initial deposit is “teeny,” according to one CEO who has such an account – only $100,000 – but since the accounts trade primarily in the stock issued by initial public offerings, the rewards are probably quite handsome. After all, it has been commonplace for IPOs to double on their first day of trading.

“It’s a pure IPO account where they just buy and sell,” said one person who was approached about opening an account after his company signed on to do some business with CSFB’s Menlo Park investment banking office. Quattrone is “basically making hundreds of thousands – if not millions – of dollars, buying IPO stock” for his clients, said a former banker who has such an account.

The former banker says that Quattrone knows of the accounts and may even select the recipients. “He tells every CEO ‘Open up an account and sign discretionary management to me,’” meaning that CSFB’s trading desk can manage the flow of the account as it sees fit. “They’re always buying and selling.”
Since the accounts are discretionary – their holders don’t have control over specific trades – the buying and selling takes place without the account holder knowing about the specific activity. The accounts are offered after the IPO is complete, so – according to a CEO who has such an account – executives and company officers don’t trade their own stock.

“It’s nothing more than letting key people in on what they thought was a built-in IPO market,” said the CEO, who is a Friend of Frank. “They invite you to Aspen, too,” said the CEO. “There’s plenty of little bennies they throw out there. They’re in the client-happiness business.”

There doesn’t seem to be any agreement across the industry about whether such accounts – which could be interpreted as incentives for a CEO or other corporate officer to continue a banking relationship – are a violation of the law or of SEC regulations. Goldman Sachs, the largest IPO underwriter in Silicon Valley, is said not to engage in the practice. Morgan Stanley, also a big player in high-tech IPOs – and the bank where Quattrone once worked – is said to have engaged in the practice intermittently over the last few years. Spokesmen at both of those banks did not have specific knowledge of their banks’ policies or practices.

CSFB defended the accounts. In a statement, a spokesperson for the bank said: “These accounts are entirely appropriate and consistent with industry practice.”

The Securities and Exchange Commission and a federal grand jury in New York are investigating CSFB’s treatment of various IPOs, and the commissions paid and allocations made on offerings including VA Linux. The U.S. Attorney’s office declined to comment on its investigations as did an SEC spokesman.

The Friends of Frank accounts have raised eyebrows with those who aren’t in the regulation business. “I’m not sure it was right,” said one CEO who declined to open such an account. “You’re building churn into your stock. You were doing no favors for anybody.”

Given the closed nature of the Friends of Frank accounts – a small group of CEOs and other well-connected Silicon Valley movers and shakers – it’s easy to see how the accounts could end up serving that end. Individual CEOs don’t trade their own stock, but, through CSFB’s trading desk, they could be buying and selling the stock of their compatriots at other newly public Silicon Valley companies.

“You’ve created a churn club,” said a former banker who hotly denounced the practice as flatly unethical. “You’re giving the CEO an incentive to make his decision on criteria other than his fiduciary responsibility.”

Investment banks aren’t solely in the business of underwriting public stock offerings. There are a host of services – secondary stock offerings, cash management and treasury services, bond underwriting, mergers and acquisitions – that publicly traded companies need as they grow and for which banks charge hefty fees. Tying individual banking services – the management of one person’s private assets – to corporate business is, at best, a questionable practice, said the former banker.

And Quattrone might have an additional incentive – besides pride – in getting as much follow-on business through CSFB’s doors as possible. He and his Menlo Park-based team of lead bankers take home a healthy percentage of the revenue they generate. For two years, underwriting fees alone generated more than $1 billion for the tech group, according to some reports.
Plenty of people in Silicon Valley say the Friend of Frank accounts are nothing more than a harmless way to reward loyal customers and friends, just like the hard-to-join but very lucrative side funds that venture capital partnerships offer friends of their firms. Besides, many Silicon Valley CEOs, venture capitalists and investors have brushed off reports of the SEC and U.S. Attorney’s office investigations as “false alarms,” sure-to-be-futile inquiries into established and accepted and perfectly legal business practices.

“It’s not like a venture fund. Your capital’s not really at risk,” said one VC who has had some dealings with Quattrone. On top of that, venture fund money is held for a longer period of time, and venture investing – more formally called private equity – doesn’t directly rely on the public markets to return money to those who contribute to the funds.

“I think it’s a gray area,” said the venture capitalist, “to be in a position of institutional power, so to speak, and use it for individual gain.”